SodaStream Hopes New Flavors Will Pop

SodaStream and Del Monte team up for new fruity beverage flavors.

SodaStream(NASDAQ:SODA) is hoping that a new syrup deal with Fresh Del Monte(NYSE:FDP) will bear fruit.

SodaStream will roll out a line of Del Monte-branded syrups. This first wave of offerings will be co-branded bottles with tropical, Caribbean, and orange flavor options.

Del Monte is no stranger to beverages, offering several juices and nectars. This would be its first foray into carbonated beverages, but it's not alone in that regard. Kraft Foods and Campbell Soup have offered up their beverage brands -- Kool-Aid, Crystal Light, and Country Time for Kraft, and V8 Splash and V-Fusion for Campbell -- to be marketed as syrups for SodaStream's carbonated water.

SodaStream's flavors have been viewed by investors as a strength. The company doesn't make a lot of money on its starter systems that turn flat water into seltzer. The real margins are made on the flavors and carbon-dioxide refills, and that's where Del Monte will join Kraft and Campbell as familiar brands for soda sippers to experience in an entirely different way.

The Del Monte deal comes at a great time. SodaStream's stock took a hit in its latest quarter on disappointing syrup sales. Flavor unit sales rose just 7% worldwide and actually declined by nearly 3% in the United States. This contrasts with the healthier 34% spike in carbonator refills and 27% in soda maker starter kits. SodaStream explained away part of the discrepancy on retailer stocking moves, but the market is still wondering why SodaStream's flavors aren't selling as briskly as CO2 canisters and the lower-margin appliance.

A popular explanation is that a lot of buyers simply enjoy soda water. However, there's no shortage of syrups and flavors out there that can be added to a fizzed-up serving. This is likely a factor in the company's declining flavor sales, and that's why SodaStream either improving its own offerings or teaming up with magnetic brands including Kraft, Campbell, and now Del Monte can only help. Given the bad rap that carbonated beverages have been getting lately from parents worried about what their kids are drinking, the healthy nature of the Del Monte brand could really pay off here.

Author

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.
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